§33-33-12. Requirements for audit committees.
This section shall not apply to foreign or alien insurers
licensed in this state or an insurer that is a SOX Compliant Entity
or a direct or indirect wholly-owned subsidiary of a SOX Compliant
Entity.

(1) The audit committee shall be directly responsible for the
appointment, compensation and oversight of the work of any
accountant, including resolution of disagreements between
management and the accountant regarding financial reporting, for
the purpose of preparing or issuing the audited financial report or
related work pursuant to this article. Each accountant shall
report directly to the audit committee.

(2) Each member of the audit committee shall be a member of
the board of directors of the insurer or a member of the board of
directors of an entity elected pursuant to subdivision (3), section
two of this article and subdivision (5) of this section.

(3) In order to be considered independent for purposes of this
section, a member of the audit committee may not, other than in his
or her capacity as a member of the audit committee, the board of
directors, or any other board committee, accept any consulting,
advisory or other compensatory fee from the entity or be an
affiliated person of the entity or subsidiary thereof. However, if
law requires board participation by otherwise nonindependent
members, that law shall prevail and such members may participate in
the audit committee and be designated as independent for audit committee purposes, unless they are an officer or employee of the
insurer or one of its affiliates.

(4) If a member of the audit committee ceases to be
independent for reasons outside the member's reasonable control,
that person, with notice by the responsible entity to the state,
may remain an audit committee member of the responsible entity
until the earlier of the next annual meeting of the responsible
entity or one year from the occurrence of the event that caused the
member to be no longer independent.

(5) To exercise the election of the controlling person to
designate the audit committee for purposes of this article, the
ultimate controlling person shall provide written notice to the
commissioners of the affected insurers. Notification shall be made
timely prior to the issuance of the statutory audit report and
include a description of the basis for the election. The election
can be changed through notice to the commissioner by the insurer,
which shall include a description of the basis for the change. The
election shall remain in effect for perpetuity, until rescinded.

(6) (A) The audit committee shall require the accountant that
performs for an insurer any audit required by this article to
timely report to the audit committee in accordance with the
requirements of Statement of Auditing Standards (SAS) No. 61,
"Communication with Audit Committees" or its replacement,
including:

(ii) All material alternative treatments of financial
information within statutory accounting principles that have been
discussed with management officials of the insurer, ramifications
of the use of the alternative disclosures and treatments, and the
treatment preferred by the accountant; and

(iii) Other material written communications between the
accountant and the management of the insurer, such as any
management letter or schedule of unadjusted differences.

(B) If an insurer is a member of an insurance holding company
system, the reports required by paragraph (A) of this subdivision
may be provided to the audit committee on an aggregate basis for
insurers in the holding company system, provided that any
substantial differences among insurers in the system are identified
to the audit committee.

(7) The proportion of independent audit committee members
shall meet or exceed the following criteria:

Prior Calendar Year Direct Written and Assumed Premiums

$0-$300,000,000

Over $300,000,000-
$500,000,000

Over $500,000,000

No minimum
requirements.

Majority (50% or more)
of members shall be
independent.

Supermajority of
members (75% or more)
shall be independent.

(A) The commissioner has authority afforded by state law to
require the entity's board to enact improvements to the
independence of the audit committee membership if the insurer is in
a risk based capital action level event, meets one or more of the
standards of an insurer deemed to be in hazardous financial condition, or otherwise exhibits qualities of a troubled insurer.

(B) All insurers with less than $500 million in prior year
direct written and assumed premiums are encouraged to structure
their audit committees with at least a supermajority of independent
audit committee members.

(C) Prior calendar year direct written and assumed premiums
shall be the combined total of direct premiums and assumed premiums
from nonaffiliates for the reporting entities.

(8) An insurer with direct written and assumed premium,
excluding premiums reinsured with the Federal Crop Insurance
Corporation and Federal Flood Program for less than $500 million,
may make application to the commissioner for a waiver from this
section's requirements based upon hardship. The insurer shall
file, with its annual statement filing, the approval for relief
from this section with the states that it is licensed in or doing
business in and the National Association of Insurance
Commissioners. If the nondomestic state accepts electronic filing
with the National Association of Insurance Commissioners, the
insurer shall file the approval in an electronic format acceptable
to the National Association of Insurance Commissioners.